Toronto based telecom equipment manufacturer, Nortel Network Corps is the latest in the line of companies to face the recession crunch as it filed for Chapter 11 bankruptcy protection in Wilmington. All this a day before it was due to pay almost $1 billion interest debt on bonds. The debt amount goes up to $11 billion!! The move doesn’t come across as a shock or surprise. According to the sources, it was very much anticipated and the fact that the management was able to delay it for so long is something that’s commendable. Amidst all these the company insists on fulfilling its role as the sponsors of Vancouver winter Olympics, scheduled to be held in 2010.
The largest telecom-equipment manufacturer in North-America, its shares was once traded at $124.50, back in the year 2000. Yesterday they closed at 12cents on TSX. This state of financial crunch can be blamed on the inefficient and incompetent management and lack of focus and direction in operations. It’s defamed to have been splurging all the profits on top-executives while neglecting such crucial areas as R&D. trouble started as early as 2005 and with the divestiture of its high-speed-mobile-phone unit in 2006, its sales and ultimately the revenue have been hit badly.
The share holders are the worst hit with the value having depreciated as much as 95%!! Next are the employees, 30,000 world wide. So who is getting the pink slip next?? Service is surely going to be affected and the users will be suffering.
Mike Zafirovski, CEO, Nortel Corp, however, is still optimistic about future prospects. According to him, restructuring is on the cards and Nortel Corp is very much going to exploit its ‘Core Competencies’. Well all this seems a far-fetched notion and only a renaissance of sort is going to restore it back to glory. The good news amidst all this though is that the Canadian government is willing to provide financial assistance to the company for its restructuring.
